The South African Reserve Bank published a summary of its 2025 Biennial Conference, held on 27–28 March, which reviewed 25 years of inflation targeting and debated how the framework should evolve in a post-pandemic environment. A central theme was that South Africa’s current inflation target range of 3–6%, with a 4.5% midpoint, is viewed by many participants as too high and too wide to deliver price stability, with broad support expressed for moving to a lower target, including discussion of a 3% point target. The summary highlights that inflation targeting is now used by 73 countries, with most advanced economies targeting 2% and many inflation-targeting emerging markets aiming closer to 3%. It notes South Africa’s adoption of inflation targeting in 2000 and reports that inflation has averaged below 5% since the Monetary Policy Committee signalled a preference for the midpoint in late 2017, alongside better-anchored inflation expectations. Contributors argued that lower inflation could reduce uncertainty, support planning and investment, dampen exchange rate volatility and deliver fiscal gains through lower borrowing costs, while several presentations suggested the short-term output costs of disinflation may be small. The discussion also flagged constraints from administered prices, fiscal deficits and rising debt, and weighed a glide path against a clearer point target supported by a sufficiently long policy horizon and an asymmetric reaction function. The publication includes a link to a set of conference papers providing additional perspectives on monetary policy.
South African Reserve Bank 2025-05-29
South African Reserve Bank publishes biennial conference summary outlining the case for a lower inflation target toward 3%
The South African Reserve Bank's 2025 Biennial Conference reviewed 25 years of inflation targeting, discussing post-pandemic framework evolution. Participants supported lowering South Africa's 3–6% inflation target to enhance price stability, aligning with 2-3% targets of other economies. The conference addressed benefits of lower inflation, such as reduced uncertainty and fiscal gains, while considering constraints like administered prices and fiscal deficits.